Thank you for the positive feedback since Monday’s ‘demand a professional’ article.
Quality work and labour is a big problem facing industry.
Someone working hard and efficiently in a job they are skilled at, within a business supportive of them, can generate a heck of a lot of value. Value for themselves, the business, and the business the business is serving.
On the other hand, someone stuck with the cruise control on, can quickly prove their cost to all.
There is no question that ‘skin in the game’ is a significant motivator for most. The frustration I hear from farmers about quality workmanship, either from their own staff, or those of a business providing them a service; is overwhelmingly from staff seemingly disinterested in a job they don’t intend on staying long in.
Gone are the days of working in a job for 40+ years and retiring with a gold watch.
I wrote a paper for my Masters on investment models in farming, and concluded that a ‘3 tiered’ system was the most sustainable due primarily to the ability to incentivise quality employees.
It’s clearly not for every business, but the purposes of this article is to share the idea to create some critical thought and/or conversation.
A very simplified explanation is;
- 1 company owns the land. These are long term investors not seeking regular involvement in the operations but want exposure to agricultural investments.
- Another company (trading) buys the inputs and markets the product. This protects the core business while keeping the economies of scale of the purchasing and selling decisions. The owners interests are focused medium term, both within the season, but also longer term from season to season.
- The other company is the operations business. It hires the machinery and inputs off the trading company, while being remunerated for the work done. It’s focus is short term, aiming at making excellent decisions on a daily basis within the vision of the other two businesses goals. The purposes of it is to encourage efficiency by being able to sell equity to the long serving high quality employees making the day to day decisions. Over time, these employees may be offered shares in the trading company if they want exposure to longer-term decision-making outcomes.
At a brief glance, it might seem complex. But if you’re talking a business with $30m turnover it’s fairly simple. With the big upside of leveraging against one of the biggest challenges of large-scale farming, labour.
The purpose is to align the goals and thinking time frame with those making the investment (of either time, money or effort).
Thanks for your attention and feel free to call to discuss or critic. Enjoy seeding this weekend.